Small business owners often take on the many tasks required to operate their business themselves, especially in the early years. When it comes to HR needs, small business owners must decide whether they want to handle tasks themselves, hire in-house staff, or outsource HR. Whoever handles a small business’ HR tasks, one of the most important jobs is payroll. Small business owners need to keep their payroll on track and in-compliance with tax and labor laws to avoid headaches down the road. As a Professional Employer Organization (PEO) in Hawaii, we partner with Hawaii businesses to take care of all their HR needs; including payroll. Let’s take a look at some payroll tips for Hawaii small business owners.
6 Payroll Tips for Hawaii Small Business Owners
Stay up to date on Hawaii labor and payroll laws
With so many laws to follow, it is common for small business owners to miss a rule or to be unaware of changes that have rolled out. As difficult as it is, to avoid employee lawsuits and tax issues, it is extremely important to have a system in place that will help you stay up to date on all Hawaii labor and payroll laws that affect how you manage your payroll.
Properly classify workers for payroll taxes
Classifying workers as employees or independent contractors determines whether a small business is responsible for withholding and paying payroll taxes. With this in mind, it is very important to properly classify your workers. Tip: if a contractor is performing the same or similar work as your employee, they will usually have to be classified as an employee.
Calculate all your payroll expenses
In addition to wages, your payroll expenses include federal and state payroll taxes. Do not get blindsided by these costs. Don’t forget that as an employer, you are required to match the Social Security and Medicare that is withheld from your employee’s paychecks, which is equivalent to 7.65% of their gross pay.
Hawaii employers also have to pay unemployment insurance to the state as well as what’s known as the Employment and Training Assessment (E&T) Rate.
Get an employer identification number
Businesses with employees require an employer identification number (EIN). If your business is a partnership or corporation, you should already have an EIN. If you don’t already have one, you will need to apply for one through the IRS before tax time.
Double-check your data
It is easy to make a mistake when managing payroll in-house, even if you’re using payroll software. Technology isn’t perfect and neither are the humans entering the data; and unfortunately, even small errors can be costly. The best way to protect yourself from payroll errors is to hire a payroll expert and have them double-check the data and keep up with any changes to the payroll laws or to outsource your payroll needs.
Set up automatic tax deposits
The best way to protect yourself from a snowballing tax bill is to set up automatic federal and state tax deposits with your payroll company or PEO. This way, you can rest easy knowing that you will be in compliance.
Not excited about employer laws? That’s okay; we’ve got you covered through HR outsourcing! When you partner with Makai HR you can get on with the business you are trying to grow while we take care of your employee needs from payroll to taxes, health insurance/benefits and worker’s compensation. You also gain peace of mind that you are compliant with all of Hawaii’s employer laws (if you’ve ever looked you know that the list is very long and changes happen). When choosing a PEO to partner with, there are many things to consider including cost, services, and technology solutions.
With the cost of doing business in Hawaii at record highs, we know how important it is to keep labor costs in line with revenue. Our plans are priced competitively and include value-added services like time-in/time-out systems. Our three tiers of PEO service plans are tailored to the size of your business and specific needs. We offer a 100% paperless solution which means that your employees can manage their needs through a computer, tablet, or phone. We can truly improve your employees’ work benefits while freeing you up to run your business.
What are you waiting for? Companies that partner with a PEO benefit from 7-9% faster growth, 10-14% lower employee turnover; and they are 50% less likely to go out of business. Contact us today to get started!